West Virginia Considers Ban on Gift Card Sales at Pawn Shops

The West Virginia legislature is considering a bill to outlaw the resale of other retailers’ gift cards at pawn shop because of a common fraud scheme.

Police say that the sale of gift cards has become an issue because people steal from department stores such as Macy’s, return the stolen items for a gift card, and then sell that gift card at a local pawn shop for 50 percent of the value.

The cards in question here are not ‘gift cards’ per se, but rather store credit cards. They often have different labelling and numbers than the cards sold as gifts. Retailers say they would like pawn shops and gift card resale sites to avoid reselling store credit cards precisely because of this problem. Some retailers have also changed their policies around how merchandise return cards can be used. For Example Lowe’s has said that merchandise credits can only be redeemed in stores and that the balances can only be check in stores in order to prevent fraud and online resale of their merchandise credit cards.

As retailers and legislatures work to combat fraud, the new laws and policies may change the way closed-loop prepaid is issued, redeemed, and marketed. As with all crime prevention, a balance will need to be struck between preventing all fraud and making shopping too difficult.

Overview by Ben Jackson, Director, Prepaid Advisory Service at Mercator Advisory Group